Numerous studies have shown that the protein tyrosine phosphatase SHP-1 modulates the expression of proinflammatory genes in leukocytes and glia that have been shown to cause inflammatory demyelination in the CNS. Accordingly, genetic deficiency in SHP-1 causes increased inflammatory demyelination in multiple animal models of multiple sclerosis (MS). Most recently, we demonstrated that SHP-1 deficiency in blood-borne monocytes is responsible for monocyte infiltration and macrophage- mediated inflammatory demyelination in the CNS of mice. With regards to MS, we published a report describing a deficiency in SHP-1 expression and function in peripheral blood leukocytes of MS patients compared to normal human subjects. We showed that SHP-1 deficiency plays a direct role in the hyper- activation of signal transducers and activators of transcription (STAT6 and STAT1)) and NF-?B. Increased activation of these transcription factors correlated with corresponding heightened expression of multiple pro-inflammatory genes in MS leukocytes compared to normal subject cells. Therefore, we propose that SHP-1 deficiency is a biologically important abnormality in leukocytes of MS patients that promotes inflammatory demyelination. This hypothesis is supported by in vivo and in vitro experiments in which induction of SHP-1 to normal levels by IFN-? reduces the expression of pro-inflammatory genes in lymphocytes and macrophages of MS patients to normal levels. Thus, specific aims 1 and 2 of this research proposal describe experimental approaches to further characterize deficiency in expression and function of SHP-1 in various leukocyte subsets from MS patients and control subjects. Adding to our preliminary report, increased numbers of MS patients with various disease sub-classifications will be included in future studies. Additionally, an expanded group of control subjects with other neurological diseases and non-MS autoimmune diseases will be included. Lastly, we have identified a specific deficiency in the transcriptional activity of one of two known promoters (promoter II) of the human SHP-1 gene in MS leukocytes compared to those of normal subjects. Interestingly, IFN-2 corrects promoter II deficiency in MS leukocytes by a currently unknown mechanism. Therefore, specific aim 3 is focused on determining recently described epigenetic alterations and transcription factor activity on promoter II that may be responsible for deficiency and cytokine-mediated effects in SHP-1 promoter II transcript expression in MS leukocytes. In summary, these studies are directed at further characterizing the abnormal expression of SHP-1 in MS and multiple downstream inflammatory pathways regulated by SHP-1 in lymphocytes and macrophages that are known to play a role in MS.